UNITED STATES
SECURITY AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED OCTOBER 31, 2008
Commission file number 333-145471
BWI HOLDINGS, INC.
(formerly Gray Creek Mining, Inc.)
(Exact name of the registrant as specified in its charter)
Nevada
(State or other jurisdiction of incorporation or organization)
3915 61 Avenue South East
Calgary, Alberta, Canada T2C 1V5
(formerly 313-6688 Willingdon Ave.
Burnaby, British Columbia, Canada, V5H 2V8)
(Address of principal executive offices, including zip code)
(403) 255-2900 (formerly (604) 434-8539)
(Telephone number, including area code)
Val-U-Corp Services, Inc.
1802 North Carson Street, Suite 212
Carson City, NV 89701-9141 (800) 555-0738 (775) 887-0738
(Name and address of agent for Service (Telephone Number) (Fax Number)
Check whether the issuer (1) filed all reports required to be filed by section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the last90 days. YES [X] NO [ ]
Indicate by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting company. See
the definitions of "large accelerated filer", "accelerated filer",
"non-accelerated filer", and "smaller reporting company" in Rule 12b-2 of the
Exchange Act.
Large accelerated filer [ ] Accelerated filer [ ]
Non-accelerated filer [ ] Smaller reporting company [X]
Indicate by check mark whether the registrant is a shell company (as defined in
Rule 12b-2 of the Exchange Act). YES [ ] NO [X]
State the number of shares outstanding of each of the issuer's classes of common
equity as of the last practicable date:
As at October 31, 2008
Common 10,746,054
Preferred nil
PART 1 - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
The un-audited quarterly financial statements for the period ended October 31,
2008, prepared by the company immediately follow.
2
BWI HOLDINGS, INC.
(FORMERLY GRAY CREEK MINING, INC.)
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS\
(Unaudited - Prepared by Management)
Consolidated Balance Sheets Statement "A"
Consolidated Statements of Income and Comprehensive Income Statement "B"
Consolidated Statements of Stockholders' Equity Statement "C"
Consolidated Statements of Cash Flows Statement "D"
Notes to Consolidated Financial Statements Statement "E"
3
Statement "A"
BWI HOLDINGS, INC.
(FORMERLY GRAY CREEK MINING, INC.)
Consolidated Balance Sheets
(Unaudited - Prepared by Management)
(US Dollars)
October 31, 2008
October 31, March 31,
2008 2008
----------- -----------
ASSETS
Current:
Accounts receivable $ 1,852,799 $ 2,190,912
Prepaid expenses 158,372 110,940
----------- -----------
2,009,171 2,301,852
----------- -----------
Performance bonds 24,906 48,645
Property and equipment, net 6,072,216 7,674,767
Goodwill 2,651,620 3,107,397
Customer lists 108,399 179,339
----------- -----------
8,857,142 11,010,148
----------- -----------
$10,866,312 $13,312,000
=========== ===========
Approved on Behalf of the Board:
"Jim Can", Director
"Kendall Dilling", Director
- See accompanying notes -
4
Statement "A"
Continued
BWI HOLDINGS, INC.
(FORMERLY GRAY CREEK MINING, INC.)
Consolidated Balance Sheets
(Unaudited - Prepared by Management)
(US Dollars)
October 31, 2008
October 31, March 31,
2008 2008
------------ ------------
LIABILITIES
Current:
Bank overdraft $ 56,753 $ 39,009
Revolving bank loan 19,364 56,743
Accounts payables and accrued liabilities 3,266,530 4,380,479
Notes payable 26,777 47,068
Due to related parties 279,385 811,289
Corporate taxes payable 21,448 23,825
Due to shareholders 471,306 1,738,755
Current portion of long-term debt 26,749 34,433
Current portion of obligations under capital lease 1,100,817 1,374,549
------------ ------------
5,269,129 8,507,150
------------ ------------
Long-term debt 15,804 36,572
Obligations under capital lease 1,985,906 3,100,043
Non-controlling interest -- 3,307,861
------------ ------------
2,001,710 6,444,476
------------ ------------
7,270,839 14,951,626
------------ ------------
STOCKHOLDERS' EQUITY
Common stock
Authorized
100,000,000 common voting stocks with a par value of
$0.001 each 20,000,000 preferred non-voting stock
with a par value of $0.001 each
Issued and outstanding
(10,746,054, 2008 - 5,250,000) common stock par value 10,746 95,734
Contributed surplus 10,661,733 5,905,201
Cumulative other comprehensive income (loss) (601,902) 150,319
Accumulated deficit (6,475,124) (7,790,880)
------------ ------------
3,595,473 (1,639,426)
Nature of operations (Note 1)
Commitments, contingencies, and subsequent events (Note 10)
------------ ------------
$ 10,866,312 $ 13,312,000
============ ============
- See accompanying notes -
5
Statement "B"
BWI HOLDINGS, INC.
(FORMERLY GRAY CREEK MINING, INC.)
Consolidated Statements of Income and Comprehensive Income
(Unaudited - Prepared by Management)
(US Dollars)
For the Three Months Ended October 31, 2008 and
Three Months Ended September 30, 2007
2008 2007
------------ ------------
Revenue $ 2,975,804 $ 4,583,930
Cost of sales 2,099,560 3,352,475
------------ ------------
Gross earnings before general and administrative expenses 876,244 1,231,455
------------ ------------
General and Administrative Expenses:
Advertising and promotion 84,140 29,387
Automotive 5,310 3,745
Bad debts (recovery) (143,575) --
Depreciation 296,316 485,514
Insurance 25,405 --
Interest and bank charges 23,894 43,448
Interest on long-term debt 89,341 105,603
Office 41,299 145,078
Professional fees 31,450 63,310
Rent 76,588 75,045
Repairs and maintenance 2,553 5,621
Salaries and benefits 268,746 357,383
Telephone 39,682 57,410
Travel 9,860 --
------------ ------------
851,009 1,371,544
------------ ------------
Income (Loss) before other items and income taxes 25,235 (140,089)
------------ ------------
Other Income (Expenses):
Write off mining claims (8,000) --
Gain on sale of assets 12,056 --
------------ ------------
Income (Loss) before income taxes 29,291 (140,089)
Income taxes -- --
------------ ------------
Net Income (Loss) 29,291 (140,089)
Other comprehensive income (loss)
Foreign currency translation adjustment (727,561) (53,468)
------------ ------------
Total comprehensive Loss for the quarter $ 698,270 $ 197,557
============ ============
Basic and diluted Income (Loss) per share $ 0.00 $ (0.00)
Weighted average stock outstanding 10,746,054 41,412,198
============ ============
- - See accompanying notes -
6
Statement "B"
Continued"
BWI HOLDINGS, INC.
(FORMERLY GRAY CREEK MINING, INC.)
Consolidated Statements of Income and Comprehensive Income
(Unaudited - Prepared by Management)
(US Dollars)
For the Six Months Ended October 31, 2008, and
the Six Months Ended September 30, 2007
2008 2007
------------ ------------
Revenue $ 6,600,305 $ 7,968,597
Cost of sales 4,769,831 6,219,564
------------ ------------
Gross earnings before general and administrative expenses 1,830,474 1,749,032
------------ ------------
General and Administrative Expenses:
Advertising and promotion 180,049 106,732
Automotive 9,081 7,489
Bad debts (144,655) --
Depreciation 637,753 846,905
Insurance 27,319 --
Interest and bank charges 43,853 81,418
Interest on long-term debt 204,942 216,119
Office 83,977 312,622
Professional fees 74,300 141,325
Rent 201,722 171,456
Repairs and maintenance 50,811 11,242
Salaries and benefits 660,643 656,363
Telephone 82,611 96,315
Travel 21,795 --
------------ ------------
2,134,201 2,637,986
------------ ------------
Income (Loss) before other items and income taxes (303,727) (888,953)
------------ ------------
Other Income (Expenses):
Write off of mining claim (8,000) --
Gain on sale of assets 441,695 --
------------ ------------
Income (Loss) before income taxes 129,968 (888,953)
Income taxes -- --
------------ ------------
Net Income (Loss) 129,968 (888,953)
Other comprehensive income (loss)
Foreign currency translation adjustment (622,253) (93,283)
------------ ------------
Total comprehensive loss for the year $ 622,253 $ 982,236
============ ============
Basic and diluted Income (Loss) per share $ 0.01 $ (0.02)
Weighted average stock outstanding 10,746,054 41,412,198
============ ============
7
Statement "C"
BWI HOLDINGS, INC.
(FORMERLY GRAY CREEK MINING, INC.)
Consolidated Statements of Stockholders' Deficiency
(Unaudited - Prepared by Management)
(US Dollars)
October 31, 2008
Retained
Common Stock Stock to Contributed Comprehensive Earnings
Comment Number Par Value be Issued Surplus Income (Deficit) Total
------- ------ --------- --------- ------- ------ --------- -----
Balance 8/10/06 -- $ -- $ -- $ -- $ -- $ -- $ --
Issued for cash 5,250,000 5,250 -- 20,250 -- -- 25,500
Net loss -- -- -- -- -- (174) (174)
----------- ------- -------- ----------- --------- ----------- ----------
Balance 4/30/07 5,250,000 5,250 -- 20,250 -- (174) 25,326
----------- ------- -------- ----------- --------- ----------- ----------
Net loss -- -- -- -- -- (23,838) (23,838)
----------- ------- -------- ----------- --------- ----------- ----------
Balance 4/30/08 5,250,000 5,250 -- 20,250 -- (24,012) 1,488
----------- ------- -------- ----------- --------- ----------- ----------
Issued on
recapitalization and
acquisition of
Budget Waste Inc. 5,496,054 5,496 -- 10,641,483 150,319 (6,581,080) 4,216,218
Other Comprehensive
Income -- -- -- -- (752,221) -- (752,221)
Net Income -- -- -- -- -- 129,968 129,968
----------- ------- -------- ----------- --------- ----------- ----------
Balance 10/31/08 10,746,054 $10,746 $ -- $10,661,733 $(601,902) $(6,475,124) $3,595,453
=========== ======= ======== =========== ========= =========== ==========
- See accompanying notes -
8
Statement "D"
BWI HOLDINGS, INC.
(FORMERLY GRAY CREEK MINING, INC.)
Consolidated Statements of Cash Flows
(Unaudited - Prepared by Management)
(US Dollars)
For the Seven Months Ended October 31, 2008 and
the Six Months Ended September 30, 2007
2008 2007
----------- -----------
Operating Activities:
Net Income (Loss), per Statement "B" $ 129,968 $ (888,953)
Adjustments for non-cash items -
Depreciation 637,753 836,905
Loss (Gain) on sale of asset (441,695) --
Changes in non-cash working capital -
(Increase) Decrease in accounts receivable 338,113 (785,899)
(Increase) Decrease prepaid expenses (47,432) (18,359)
Increase (Decrease) in corporate taxes payable (2,377) (17,611)
Increase (Decrease) in accounts payable and accrued liabilities (765,421) 903,185
----------- -----------
Cash flows from (used in) operating activities (151,865) 29,268
----------- -----------
Investing Activities:
(Increase) Decrease in performance bonds 23,739 (4,023)
Additions to property and equipment (176,098) (960,106)
Proceeds on sale of property and equipment 122,419 --
Acquisitions of business assets, net of cash acquired -- --
----------- -----------
Cash flows from (used in) investing activities (29,940) (964,129)
----------- -----------
Financing Activities:
Increase (Decrease) in revolving bank loans (37,379) (81,090)
Increase (Decrease) in bank overdraft 17,744 60,557
Increase (Decrease) in notes payable (20,291) (20,236)
Proceeds on issuance of capital stock -- 5,000
Repayment of long-term debt (28,452) (76,725)
Repayment of obligations under capital lease (774,471) 216,936
Proceeds from related parties 625,467 182,375
Proceeds from shareholders 200,547 746,174
----------- -----------
Cash flows from (used in) financing activities (16,835) 1,032,991
----------- -----------
Effect of exchange rate changes on cash 198,640 98,130
Net Increase (Decrease) in Cash and Cash Equivalents -- --
Cash and cash equivalents, beginning -- --
----------- -----------
Cash and cash equivalents, ending $ -- $ --
=========== ===========
Supplemental Disclosure of Cash Flow Information:
Interest paid $ 204,942 $ 216,119
Income taxes paid -- --
- See accompanying notes -
9
Statement "E"
BWI HOLDINGS, INC.
(FORMERLY GRAY CREEK MINING, INC.)
(Unaudited - Prepared by Management)
Notes to Consolidated Financial Statements
October 31, 2008
1. NATURE OF OPERATIONS:
a) Condensed Financial Statements -
These financial statements do not include all of the disclosure contained in the
Company's April 30, 2008 year end financial statements, but only descriptions of
significant and material changes that have incurred in this interim period.
Readers are requested to read these financial statements in conjunction with the
financial statements included in the Company's 10-K Annual Report filed July 24,
2008 and the Company's 8-K Entry Into a Material Definitive Agreement filed
November 13, 2008..
b) Company Description -
These financial statements include the accounts of BWI Holdings, Inc. (formerly
Gray Creek Mining, Inc.) (Formerly Gray Creek Mining, Inc. a Nevada Corporation)
(the "Company") and its wholly owned subsidiary Budget Waste Inc. (an Alberta
Corporation) "Alta". Alta is the successor corporation following the July 1,
2006 amalgamation of Alta and its wholly owned subsidiaries: Kosland Waste
Removal Ltd. (acquired February 15, 2006); DB Waste Disposal 2005 Ltd. (acquired
March 1, 2006); Strathmore Septic Services (1980) Ltd. (acquired March 1, 2006),
593250 Alberta Ltd. (operating as DB Port-a-Pod acquired March 1, 2006); All
Waste Systems Ltd. (acquired March 1, 2006); Rocky Mountain Waste Services Inc.
(acquired March 1, 2006); 882880 Alberta Ltd. (acquired April 30, 2006) and
Finnie Water Hauling Ltd. (acquired June 30, 2006). Subsequent to the
amalgamation, the Company also acquired Hydrovac Alberta Inc. (acquired December
1, 2006) and 4M Water Hauling Ltd. (acquired February 16, 2007). The Company
also acquired the assets only of 202287 Construction Services Ltd. (acquired
November 30, 2006), Muldowney Holdings Ltd. (acquired December 1, 2006) and PJ.s
Waste and Recycling Services Ltd. (acquired February 14, 2007).
The Company provides non-hazardous waste collection, transfer, recycling and
disposal services. Additionally, the Company provides support to the
construction industry such as fence rentals, sanitary facility rentals, bin
rentals, hydrovac and water hauling. The Company operates primarily, but not
exclusively, in Alberta, Canada. The Company evaluates principal operations
through three functional departments: Solid Waste, Liquid Waste and Water
Hauling. The Company has ceased its mineral exploration activities.
c) Consolidated Statements -
Effective November 10, 2008 the Company completed the acquisition of Budget
Waste Inc. (Alta). According to accounting principles generally accepted in the
United States, the above noted acquisition is considered to be a capital
transaction in substance, rather than a business combination. That is, the
acquisition is equivalent to the issuance of stock by Budget Waste Inc. (Alta)
for the net monetary assets of BWI Holdings, Inc. (formerly Gray Creek Mining,
Inc.) accompanied by a recapitalization and is accounted for as a change in
capital structure. Accordingly, the accounting for the acquisition is identical
to that resulting from a reverse acquisition. All material inter-company
balances and transaction have been eliminated in consolidation.
d) Comparative Figures -
The comparative figures are of Budget Waste, Inc. As discussed above, the
continuing operations are of Budget Waste Inc. and the operations of Gray Creek
ceased following the capital transaction described above. BWI Holdings, Inc.
(formerly Gray Creek Mining, Inc.) reports on an April 30 fiscal year end. Prior
to the acquisition, Budget Waste reported on a March 31 fiscal year end.
Comparative figures have been reclassified, where applicable, in order to
conform to the current periods' presentation.
10
Statement "E"
BWI HOLDINGS, INC.
(FORMERLY GRAY CREEK MINING, INC.)
(Unaudited - Prepared by Management)
Notes to Consolidated Financial Statements
October 31, 2008
1. NATURE OF OPERATIONS: CONTINUED
e) Going Concern -
The Company's ability to continue as a going concern is dependant upon achieving
profitable operations and upon the continued financial support of its lenders
and investors. The outcome of these matters cannot be predicted at this time.
Due to the recurring losses of the Company, the Company must continue to obtain
external investment capital and financing. On going operations will be dependant
upon the execution of the Company's business plan including achieving more
efficient operations and marketing initiatives and the successful listing of the
Company on a public market.
These financial statements do not include any adjustments to the amounts and
classification of assets and liabilities that might be necessary should the
Company be unable to continue as a going concern.
2. SIGNIFICANT ACCOUNTING POLICIES:
a) Cash and Cash Equivalents -
Cash and cash equivalents consist of cash and deposit instruments with an
initial maturity of three months or less.
b) Accounts Receivable -
Receivables are recorded when invoiced or advanced and represent claims against
third parties that will be settled in cash. The carrying value of receivables,
net of the allowance for doubtful accounts, represents the estimated net
realizable value. The estimate for the allowance for doubtful accounts is based
upon historic collection trends, type of customer and age of receivables. If
events indicate that specific receivable balances may be impaired, further
consideration is given to those balances and the allowance is adjusted
accordingly. Accounts are written off when the Company's efforts to collect are
unsuccessful.
c) Income Taxes -
The Company accounts for income taxes in accordance with Statement of Financial
Accounting Standards ("SFAS") No. 109 "Accounting for Uncertainty in Income
Taxes". Under SFAS No. 109, deferred income tax assets and liabilities are
determined based on differences between the financial statement reporting and
tax bases of assets and liabilities and are measured using the enacted tax rates
and laws in effect when the differences are expected to reverse. The measurement
of deferred income tax assets is reduced, if necessary, by a valuation allowance
for any tax assets and liabilities of a change in tax rates realized. The effect
on deferred income tax assets and liabilities of a
change in tax rates is recognized in the period that such tax rate changes are
enacted. FIN No.48 prescribes a recognition threshold and measurement attribute
for financial statement recognition ad measurement of tax positions taken into
in tax returns.
To the extent interest and penalties may be assessed by taxing authorities on
any underpayment of income tax, such amounts have been accrued and are
classified as a component of income tax expense in our Consolidated Statements
of Operations. The Company elected this accounting policy, which is a
continuation of our historical policy, in connection with our adoption of FIN
48.
11
Statement "E"
BWI HOLDINGS, INC.
(FORMERLY GRAY CREEK MINING, INC.)
(Unaudited - Prepared by Management)
Notes to Consolidated Financial Statements
October 31, 2008
2. SIGNIFICANT ACCOUNTING POLICIES: CONTINUED
d) Property and Equipment -
Property and equipment are recorded at cost. Expenditures for major additions
and improvements are capitalized while major maintenance expenditures are
expensed as incurred. In accordance with SFAS 144 "Accounting for the Impairment
or Disposal of Long-Lived Assets", the Company reviews its assets annually for
impairment. Depreciation is provided over the estimated useful lives of the
assets on a declining balance basis at the following annual rates:
Equipment 20%
Waste bins 10%
Automotive 20%
Port-a-Potties 20%
Trailers 20%
Assets under capital lease 20%
Office 20%
Heavy trucks and equipment 20%
Computer equipment 30%
Tools and equipment 20%
Leasehold developments 20%
Buildings 4%
Depreciation for property and equipment purchased during the year is calculated
at one-half of the above rates.
e) Leases -
The Company leases property and equipment in the ordinary course of business.
Significant lease obligations relate to trucks, waste bins, and compactors.
These leases have varying terms and may or may not include purchase or buyout
options and guaranteed residuals. The terms of these leases are considered when
determining whether a lease is classified as operating or capital.
The majority of the Company's leases are capital leases. Assets under capital
lease are capitalized using interest rates appropriate at the inception of each
lease and are amortized over their estimated useful lives, using the same method
as similar assets that the Company owns. The present value of the lease payments
is recorded as a debt obligation as disclosed in Note 11.
Other leases are classified as operating when lease terms are significantly
shorter than the assets' economic useful lives, or relatively low fixed minimum
lease payments. Management expects that in the normal course of business, these
leases will be renewed, replaced with new leases or replaced with fixed asset
expenditures.
12
Statement "E"
BWI HOLDINGS, INC.
(FORMERLY GRAY CREEK MINING, INC.)
(Unaudited - Prepared by Management)
Notes to Consolidated Financial Statements
October 31, 2008
2. SIGNIFICANT ACCOUNTING POLICIES: CONTINUED
f) Goodwill and Intangible Assets -
Through expansion by acquisition, the Company has acquired goodwill and
intangible assets - mainly customer lists. In accordance with SFAS 142
"Accounting for Goodwill and Intangible Assets", goodwill is recorded at cost
and is not subject to amortization. Customer lists are recorded at cost and
amortized over their estimate useful lives on a straight-line basis. The useful
lives of customer lists are estimated to be three years. These assets are
reviewed annually for impairment; more frequently if management has reason to
believe that conditions exist that may lead to impairment.
g) Impairment of Long-Lived Assets -
As described above, the Company assesses the recoverability of its long-lived
tangible and intangible assets at least annually. Management assesses if there
have been significant events or changes in circumstances that indicate an asset
or group of assets may have become impaired. A test of recoverability is
performed comparing the carrying value of a group of assets to its undiscounted
future cash flows. If carrying values are in excess undiscounted future cash
flows, impairment is measured by comparing the internal discounted cash flow
analysis or a third party valuation. Estimating future cash flows required
significant judgment and projections may vary from cash flows eventually
realized.
h) Foreign Currency Translation -
The functional currency for Budget Waste Inc. (Alta) is the Canadian dollar. The
reporting currency of BWI Holdings, Inc. (formerly Gray Creek Mining, Inc.) is
the US dollar.
Translation of foreign currency denominated transactions -
Transactions undertaken in foreign currencies are translated into the functional
currency at the actual exchange rates prevailing at the time of the transaction.
Exchange gains or losses are a result of exchange rate changes between the time
the transaction is recognized and the collection of funds and are included as a
component of net income.
Translation of account balances denominated in foreign currencies on
consolidation -
The Company follows FAS 52 "Foreign Currency Translation" and uses the current
rate method whereby assets and liabilities are translated at the rate of
exchange at the Balance Sheet date. Revenues and expenses are translated at the
weighted average rate of exchange for the period. Components of stockholders'
13
Statement "E"
BWI HOLDINGS, INC.
(FORMERLY GRAY CREEK MINING, INC.)
(Unaudited - Prepared by Management)
Notes to Consolidated Financial Statements
October 31, 2008
2. SIGNIFICANT ACCOUNTING POLICIES: CONTINUED
deficiency are translated at the appropriate historic rate of exchange. Exchange
gains or losses on transaction of foreign currency are included as a component
of comprehensive income.
i) Comprehensive Income -
Other comprehensive income refers to revenues, expenses, gains and losses that
under generally accepted accounting principles are included in comprehensive
income but are excluded from net income as these amounts are recorded directly
as an adjustment to stockholders' deficiency. The Company's other comprehensive
income is primarily comprised of unrealized foreign exchange gains and losses.
j) Revenue Recognition -
In accordance with SEC Staff Accounting Bulletin 104, the Company recognizes
revenue when there is persuasive evidence of an arrangement, delivery has
occurred, the fee is fixed or determinable, collectibility is reasonably assured
and there are no significant remaining performance obligations. For providing
services and short-term rentals, revenue is recognized when services or rentals
have been completed. For long-term rentals, revenue is recognized monthly over
the term of the contract. For special events, fencing, port-a-potties and other
assets that can be rented on a per diem basis, revenue is recognized when the
equipment is collected or returned.
k) Advertising -
Advertising costs are expensed as incurred and amounted to $81,140 and $180,049
for the three and six months ended October 31, 2008 and $29,387 and $106,732 for
the three and six months ended September 30, 2007.
l) Share-Based Payment -
The Company has not issued any warrants or stock options, nor has it established
any compensation plan under which options or warrants may be issued. The Company
has adopted SFAS No. 123(r) "Share Based Payment" but it does not have any
effect on the financial statements. From time to time, employees and suppliers
have been issued stock as compensation for goods and services rendered to the
Company. These issuances of stock were valued at the value of goods and services
received in accordance with pre-established rates of pay and contractual
amounts.
m) Contingencies -
The potential exposure the Company has with respect to claims, assessments and
litigation has been estimated in accordance with SFAS No. 5. It is not always
14
Statement "E"
BWI HOLDINGS, INC.
(FORMERLY GRAY CREEK MINING, INC.)
(Unaudited - Prepared by Management)
Notes to Consolidated Financial Statements
October 31, 2008
2. SIGNIFICANT ACCOUNTING POLICIES: CONTINUED
possible to predict the outcome of litigation as it is subject to many
uncertainties. It is also not always possible for management to make a
meaningful estimate of the protection loss or range of loss associated with such
litigation.
n) Use of Estimates -
The preparation of financial statements in conformity with United States
generally accepted accounting principles requires management to make estimates
and assumptions that affect the amounts reported in the financial statements and
accompanying disclosures. Significant areas requiring the use of management
estimates relate to revenue recognition, the determination of impairment of
long-lived assets, the estimation of useful lives, rates and methods of
depreciation, income taxes, recognition of bad debts allowances, accounts
payable and accrued liabilities, recognition of capital leases and
contingencies. Management believes the estimates are reasonable. Actual results
could differ from these estimates and assumptions.
o) Supplemental Cash Flow Information -
Non-cash investing and financing activities are excluded from the statement of
cash flows. Non-cash transactions are disclosed throughout the notes to the
consolidated financial statements. Total amounts paid for income taxes and
interest are disclosed on the consolidated statement of cash flows.
p) Net loss per share before comprehensive income -
The Company computes net income (loss) per share in accordance with SFAS No.
128, "EARNINGS PER Share". SFAS No. 128 requires presentation of both basic and
diluted earnings per share (EPS) on the face of the income statement. Basic EPS
is computed by dividing net income (loss) available to common shareholders
(numerator) by the weighted average number of shares outstanding (denominator)
during the period. Diluted EPS gives effect to all dilutive potential common
shares outstanding during the period using the treasury stock method. In
computing diluted EPS, the average stock price for the period is used in
determining the number of shares assumed to be purchased from the exercise of
stock options or warrants. Diluted EPS excludes all dilutive potential shares if
their effect is anti dilutive (i.e. reducing loss per share).
15
Statement "E"
BWI HOLDINGS, INC.
(FORMERLY GRAY CREEK MINING, INC.)
(Unaudited - Prepared by Management)
Notes to Consolidated Financial Statements
October 31, 2008
2. SIGNIFICANT ACCOUNTING POLICIES: CONTINUED
q) Mineral Claims -
Mineral property acquisitions, exploration and development costs are expensed as
incurred until such time as economic reserves are quantified. To date, the
company has not established any probable or proven reserves on its mineral
properties. The Company has adopted the provisions of SFAS No. 143 "ACCOUNTING
FOR ASSET RETIREMENT OBLIGATIONS" which establishes standards for the initial
measurement and subsequent accounting for obligations associated with the sale,
abandonment, or other disposal of long-lived tangible assets arising from
acquisition, construction or development and for any development of such assets.
As at October 31, 2008, any potential costs relating to the retirement of the
Company's mineral property have not yet been determined. Effective November 10,
2008, the Company has abandoned these claims.
3. RISK MANAGEMENT RELATED TO FINANCIAL INSTRUMENTS:
The company is exposed to various types of risks owing to the nature of the
business activities it carries on, including those related to the use of
financial instruments. In order to manage the risks associated with using
financial instruments, such as loan, deposit and securities, controls have been
implemented, such as risk management policies and various risk limits. These
measures aim to optimize the return/risk ratio in all its operations. The main
risks to which the company is exposed are set out below.
Fair Value -
In accordance with SFAS 107 "DISCLOSURES ABOUT FAIR VALUES OF FINANCIAL
INSTRUMENTS", the Company's financial instruments include accounts receivable,
performance bonds, bank overdraft, revolving bank loan, accounts payable and
accrued liabilities, notes payable, amounts due to related parties, amounts due
to shareholders, long-term debt, and obligations under capital leases. The fair
value of financial instruments recognized in the balance sheet approximate their
carrying amounts.
16
Statement "E"
BWI HOLDINGS, INC.
(FORMERLY GRAY CREEK MINING, INC.)
(Unaudited - Prepared by Management)
Notes to Consolidated Financial Statements
October 31, 2008
3. RISK MANAGEMENT RELATED TO FINANCIAL INSTRUMENTS: CONTINUED
Market Risk -
Market risk corresponds to the financial losses that the company could incur
because of unfavourable fluctuations in the value of financial instruments
following variations in the parameters underlying their evaluation, such as
interest rates. The policies and limits implemented are designed to mitigate
exposure to market risk arising from asset and liability management activities.
Credit Risk -
Financial instruments that potentially subject the Company to a concentration of
credit risk consist of cash and accounts receivable. The Company deposits cash
with financial institutions it believes to be creditworthy. Cash balances at
these financial institutions may exceed the federally guaranteed amount.
The Company's accounts receivable are primarily derived from trade. The Company
will maintain an allowance for doubtful accounts receivable in those cases for
which the expected collectability of accounts receivable is in question.
Liquidity Risk -
Liquidity risk represents the possibility that the company may not be able to
gather sufficient cash resources, when required and under reasonable conditions,
to meet its financial obligations. The company's overall liquidity risk is
managed by the chief financial officer and supervised by the Board of Directors.
The company monitors cash resources daily and makes sure the liquidity
indicators are in compliance with limits established in the policies set by the
company.
Interest Risk -
The Company finances its property and equipment assets through short-term
borrowing, long-term borrowing and capital and operating leases. The Company's
greatest exposure to interest risk is from its short-term borrowings, as
long-term borrowings and leases have fixed interest rates or fixed minimum lease
payments.
4. PROVISION FOR DOUBTFUL ACCOUNTS:
The Company determines its provision for doubtful accounts based upon the
accounting policy described in Note 2(b). The Company's allowance for doubtful
accounts at October 31, 2008 is $74,457 and March 31, 2008 is $989,686. During
the period, the Company sold accounts receivable for proceeds of $144,655. These
receivables had a face value of approximately $750,000 and were fully allowed
for.
17
Statement "E"
BWI HOLDINGS, INC.
(FORMERLY GRAY CREEK MINING, INC.)
(Unaudited - Prepared by Management)
Notes to Consolidated Financial Statements
October 31, 2008
5. MINERAL INTERESTS:
On November 29, 2006, the Company entered into a purchase and sale agreement to
acquire a 100% interest in one mineral claim located in the Nicola Valley mining
division located approximately 17 kilometres north of Merritt, British Columbia,
Canada, for a total consideration of $8,000. The mineral interest was held in
trust for the Company by the vendor of the property. Effective November 10,
2008, the Company has abandoned this claim and has written the investment off.
6. REVOLVING BANK LOAN:
The revolving bank loan bears interest at prime plus 2 percent per annum and is
secured by a fixed and floating charge against the Company's assets. The maximum
amount available is $58,374.
7. DUE TO RELATED PARTIES:
Amounts due to related parties have no specific terms of repayment, are
non-interest bearing and are unsecured.
8. DUE TO SHAREHOLDERS:
Amounts due to shareholders are unsecured, non-interest bearing with no specific
terms of repayment.
9. STOCKHOLDERS' DEFICIENCY:
a) Warrants -
There are no warrants outstanding at October 31, 2008 or September 30, 2007.
b) Stock Options -
There are no stock options outstanding at October 31, 2008 or September 30,
2007.
18
Statement "E"
BWI HOLDINGS, INC.
(FORMERLY GRAY CREEK MINING, INC.)
(Unaudited - Prepared by Management)
Notes to Consolidated Financial Statements
October 31, 2008
10. COMMITMENTS AND CONTINGENCIES:
a) The Company has entered into various operating leases for equipment and
premises. Minimum payments over the next five years are as follows:
2009 $408,555
2010 361,891
2011 314,537
2012 26,177
2013 400
b) The Company is involved in the following litigation -
Corey Finnie and Virginia Finnie are disputing the acquisition of Finnie Water
Hauling Ltd. by Budget and are requesting damages of $Cdn 1,000,000 ($US
867,000) and 1,000,000 (after adjusting for stock splits) shares of the Company.
Approximately $948,000 of the $Cdn 1,000,000 was purportedly related to the
assumption of liabilities related to capital leases. The plaintiff is claiming
that these obligations were not assumed by the company. The company has assumed
these obligations. The outcome of this lawsuit is indeterminable at this time.
c) Environmental -
The Company's operations are subject to federal, provincial and municipal laws
and regulations over the collection, transport, transfer and disposal of waste
products. The Company does not maintain its own landfill sites, so is not
subject to any remediation costs with respect to contaminated sites. The Company
does not transport hazardous wastes. The Company is not exposed to significant
environmental risk.
19
Statement "E"
BWI HOLDINGS, INC.
(FORMERLY GRAY CREEK MINING, INC.)
(Unaudited - Prepared by Management)
Notes to Consolidated Financial Statements
October 31, 2008
11. RELATED PARTY TRANSACTIONS:
The Company has transactions with various related parties, including the
Company's officers, directors and significant shareholders and companies
controlled by shareholders, directors or family members, and a company
controlled by the spouse of a shareholder. These transactions are in the normal
course of operations and are transacted at the exchange amount agreed to by the
related parties.
October 31, March 31,
2008 2008
------- --------
Included in accounts receivable $ -- $ 50,625
Included in accounts payable 83,531 131,122
Transactions during the three months ended
June 30, 2008 and 2006
Rent 15,187 --
Repairs and supplies 86,975 38,225
Loan interest 99,700 52,415
During the six months ended October 31, 2008, the company sold land and a
building to a Company controlled by a shareholder for $Cdn 736,000. The property
was appraised at $ Cdn 610,000. The Company recognized a gain of $Cdn 357,190 on
this transaction
During the year ended March 31, 2008 the company issued 25,000,000 common shares
to a director and officer of the Company in order to settle $250,000 of accounts
payable for management fees recorded in 2006 and 2007.
Additionally, during the year ended March 31, 2008 the Company sold property to
a related Company for proceeds of $CAD $1,200,000. The property was
independently appraised at $1,167,000. The proceeds were used to repay a
mortgage and to reduce debt owing to the related company. The company recognized
a gain of $511,876 on this sale.
20
Statement "E"
BWI HOLDINGS, INC.
(FORMERLY GRAY CREEK MINING, INC.)
(Unaudited - Prepared by Management)
Notes to Consolidated Financial Statements
October 31, 2008
12. SEGMENTED REPORTING:
The Company operates in four distinct business segments: Solid Waste, Liquid
Services, Water Hauling and Septic Services. Results of operations for these
segments for the six months ended October 31, 2008 and September 30, 2007 are as
follows:
October, 2008
Operating Gross Administration
Revenue Expenses Profit Amortization and Other Net Loss
------- -------- ------ ------------ --------- --------
Solid waste 4,469,812 3,737,549 732,263 431,894 703,712 (403,345)
Liquid Services 437,309 246,039 191,270 43,255 68,826 80,189
Water Hauling 923,294 551,408 371,886 89,213 145,313 137,360
Septic 769,891 258,566 511,324 74,390 121,170 315,764
--------- --------- --------- --------- --------- ---------
6,600,305 4,793,562 1,806,743 637,752 1,039,022 129,968
========= ========= ========= ========= ========= =========
September, 2007
Operating Gross Administration
Revenue Expenses Profit Amortization and Other Net Loss
------- -------- ------ ------------ --------- --------
Solid waste 6,200,137 4,839,264 1,360,873 651,172 1,401,370 (691,669)
Liquid Services 358,287 279,647 78,641 37,629 80,981 (39,969)
Water Hauling 816,251 637,092 179,160 85,727 184,491 (91,059)
Septic 593,922 463,562 130,360 62,377 134,240 (66,256)
--------- --------- --------- --------- --------- --------
7,968,597 6,219,564 1,749,033 836,905 1,801,081 (888,953)
========= ========= ========= ========= ========= ========
21
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION.
THE FOLLOWING DISCUSSION OF OUR FINANCIAL CONDITION AND RESULTS OF OPERATIONS
SHOULD BE READ IN CONJUNCTION WITH THE CONSOLIDATED FINANCIAL STATEMENTS AND
NOTES THERETO IN ITEM I, AND THE COMPANY'S 10-K ANNUAL REPORT, THE COMPANY'S 8-K
ENTRY INTO A MATERIAL DEFINITIVE AGREEMENT AND OTHER PUBLICLY AVAILABLE
FINANCIAL INFORMATION. THIS DISCUSSION CONTAINS FORWARD-LOOKING STATEMENTS AND
INVOLVES NUMEROUS RISKS AND UNCERTAINTIES. OUR ACTUAL RESULTS MAY DIFFER
MATERIALLY FROM THOSE CONTAINED IN ANY FORWARD-LOOKING STATEMENTS.
COMPANY OVERVIEW
The Company has been engaged in the acquisition of mining properties with a view
to exploit any mineral deposits discovered that demonstrate economic
feasibility. We have a 100% interest, held in trust by the vendor, in three
mineral claims known as the Swakum Mountain property located in the Nicola
Valley mining district located approximately 17 km north of Merritt, British
Columbia, Canada. The Company has decided to abandon these claims and pursue
other business interests through its wholly owned subsidiary Budget Waste Inc.
Budget Waste Inc. is a regional solid and liquid waste services company that
provides collection, disposal, fencing and recycling services to residential and
commercial customers in Alberta, Canada. Our Company was founded in 2001 (prior
to acquisition by BWI Holdings, Inc. (formerly Gray Creek Mining, Inc.), a
Nevada company) with one truck and 10 large roll off containers. The Company has
expanded steadily until February 2006 when it acquired the first of ten
companies through the next year.
SOURCES OF REVENUE
Our revenue consists primarily of fees charged to customers for solid and liquid
waste collection, landfill disposal and recycling services.
We derive our collection revenue from services provided to commercial and
residential customers. Services to commercial customers are generally performed
under service agreements or pursuant to contracts with municipalities. We
recognize revenue when services are rendered. Amounts billed to customers prior
to providing the related services are reflected as deferred revenue and reported
as revenue in the periods in which the services are rendered.
We determine the fees we charge our customers based on a variety of factors,
including collection frequency, level of service, route density, the type,
volume and weight of the waste collected, type of equipment and containers
furnished, the distance to the disposal, the cost of disposal and prices charged
by competitors for similar services. Our contracts with commercial customers
typically allow us to pass on increased costs resulting from variable items such
as disposal and fuel costs and surcharges. Our ability to pass on cost increases
is however, sometimes limited by the terms of our contracts.
EXPENSE STRUCTURE
Our cost of operations primarily includes tipping fees and related disposal
costs, labor and related benefit costs, equipment maintenance, fuel, liability
and workers compensation insurance and related leasing costs.
Selling, general and administrative expenses include managerial costs,
information systems, administrative expenses and professional fees.
22
Depreciation and amortization includes depreciation of fixed assets over their
estimated useful lives using the declining balance method and amortization of
customer lists over their estimated useful lives on a straigh-line basis.
OPERATING RESULTS FOR THE THREE MONTHS ENDED OCTOBER 31, 2008
For the three months ended October 31, 2008, the company reported revenues of
$2,976M ("M" representing thousands), compared to $4,584M for the three months
ended September 30, 2007. While the Company instituted a price increase during
the year which included fuel surcharges, the slowing of the economy, especially
in the construction industry negatively affected sales. Additionally, the
company reports in U.S. dollars while the company's functional currency is the
Canadian dollar which declined 15% against the U.S. dollar during this period.
The gross margin for the three months ended October 31, 2008 of $853M
represented 28.6% of revenue as compared to $1,231M for the three months ended
September 30, 2007 or 26.9%. This improvement resulted from a concerted effort
to stabilize costs and to implement stronger systems of internal control. Moving
all vehicle repairs and maintenance from outside vendors to an in house
mechanical shop and consolidation of operations also contributed to a more
positive result.
Selling, general and administrative expenses decreased to $827M for the three
months ended October 31, 2008 from $1,372M for the three months ended September
30, 2007. This decrease is due in part from depreciation which decreased to
$296M in 2009 fiscal year to date from $485M in 2008 fiscal year to date. The
company entered into a factoring agreement to sell approximately $750M of
non-current accounts receivable for $144M. The company has in prior years fully
allowed for these receivables, so the sale resulted in a large recovery of bad
debts. Additionally, general administrative and operating expenses decreased due
to the company's commitment to stronger systems of internal controls which
included the completion of the company's 2008 audit and ongoing communication
with the company's auditors. Management is encouraged by the results but
believes there is still room to achieve better operational efficiencies and will
work to continue improving the company's operations.
The company disposed of surplus assets in 2009 fiscal year to date that resulted
in a gain of $12M. The company also abandoned its mineral properties at a loss
of $8M as management believes that the waste management business must be the
company's exclusive focus. This made the company's EBITDA $415M which has been
used to retire current and long-term debt.
The Company experienced net income of $29M for the three months ended October
31, 2008 compared to a loss of $140M for 2007. This is a significant improvement
arising from improved gross margins and reduced general and administrative
expenses.
OPERATING RESULTS FOR THE SIX MONTHS ENDED OCTOBER 31, 2008
For the six months ended October 31, 2008, the company reported revenues of
$6,600M ("M" representing thousands), compared to $7,968M for the six months
ended September 30, 2007. While the Company instituted a price increase during
the year which included fuel surcharges, severe weather in April and May and the
slowing of the economy, especially in the construction industry negatively
affected sales.
The gross margin for the six months ended October 31, 2008 of $2,806M
represented 27.4% of revenue as compared to $1,749M for the three months ended
September 30, 2007 or 21.9%. Although overall sales decreased, the gross margin
increased in both percentage and absolute dollar amount. This improvement
23
resulted from a concerted effort to stabilize costs and to implement stronger
systems of internal control. Moving all vehicle repairs and maintenance from
outside vendors to an in house mechanical shop and consolidation of operations
also contributed to a more positive result.
Selling, general and administrative expenses decreased to $2,110M for the six
months ended October 31, 2008 from $2,638M for the three months ended September
30, 2007. This decrease is due in part from depreciation which decreased to $638
in 2009 fiscal year to date from $837M in 2008 fiscal year to date.
Additionally, general administrative and operating expenses decreased due to the
company's commitment to stronger systems of internal controls which included the
completion of the company's 2008, 2007 and 2006 audits and ongoing communication
with the company's auditors. General and administrative expenses increased
minimally to 32.0% of revenue in 2009 fiscal year to date compared to 33.1% in
2008 due to increases in salaries advertising and rents required to remain
competitive with other companies in the Calgary area. Additionally, costs were
incurred to implement a safety program that will result in lower costs and
potential new customers. Management will continue to monitor these expenses to
determine where additional costs can be reduced.
The company disposed of surplus assets in 2009 fiscal year to date that resulted
in a gain of $442M. This made the company's EBITDA $973M which has been used to
retire current and long-term debt.
The Company experienced net income of $130M for the six months ended October 31,
2008 compared to a loss of $(889M) for the six months ended September 30, 2007.
This is a significant improvement arising from improved gross margins.
LIQUIDITY AND CAPITAL RESOURCES FOR THE SIX MONTHS ENDED OCTOBER 31, 2008
For the six months ended October 31, 2008 there was a cash shortfall from
operations of $152M as the company retired 765M of current payables compared to
$29M for the six months ended September 30, 2007. $176M was used to acquire
equipment; $122 was raised on the disposal of surplus equipment; and 774M was
used to retire debt and obligations under capital lease. This resulted in a cash
deficiency that was provided primarily by increases in amounts due to related
parties and shareholders.
CRITICAL ACCOUNTING POLICIES AND ESTIMATES
The preparation of our financial statements requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and the disclosure of contingent assets and liabilities at the date
of the financial statements and the reported amounts of revenues and expenses
during the reporting period. On an on-going basis, management evaluates its
estimates and judgments which are based on historical experience and on various
other factors that are believed to be reasonable under the circumstances. The
results of their evaluation form the basis for making judgments about the
carrying values of assets and liabilities. Actual results may differ from these
estimates under different assumptions and circumstances. Our significant
accounting policies are more fully discussed in the Notes to our Consolidated
Financial Statements.
BAD DEBT ALLOWANCE
Estimates are used in determining our allowance for bad debts and are based on
our historical collection experience, current trends, credit policy and a review
of our accounts receivable by aging category. Our reserve is evaluated and
revised on a quarterly basis. As discussed above, the company entered into a
factoring agreement to recover some funds from accounts which were fully allowed
for in prior years.
24
INFLATION AND PREVAILING ECONOMIC CONDITIONS
To date, inflation has not had a significant impact on our operations.
Consistent with industry practice, most of our contracts provide for a
pass-through of certain costs, including increases in landfill tipping fees and,
in some cases, fuel costs. We have implemented a fuel surcharge program, which
is designed to recover fuel price fluctuations. We therefore believe we should
be able to implement price increases sufficient to offset most cost increases
resulting from inflation. However, competitive factors may require us to absorb
at least a portion of these cost increases, particularly during periods of high
inflation.
OFF-BALANCE SHEET ARRANGEMENTS
The Company has approximately 30 operating leases for vehicles and waste bins
used in the operations of the company. Approximate future lease payments over
the next five years are as follows:
2009, $408,000; 2010, $362,000; 2011, $314,000; 2012, $26,000; 2013, $500.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not required for a small issuer
ITEM 4. CONROLS AND PROCEDURES
EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES & CHANGES TO INTERNAL CONTROLS
Under the supervision and with the participation of our management, including
our principal executive officer and principal financial officer, we have
conducted an evaluation of the effectiveness of the design and operation of our
disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e)
under the Securities and Exchange Act of 1934, as of the end of the period
covered by this report. Based on this evaluation, our principal executive
officer and principal financial officer concluded as of the Evaluation Date that
our disclosure controls and procedures were effective such that the material
information required to be included in our Securities and Exchange Commission
reports is recorded, processed, summarized and reported within the time periods
specified in SEC rules and forms relating to our company, particularly during
the period when this report was being prepared.
Additionally, there were no significant changes in our internal controls or in
other factors that could significantly affect these controls subsequent to the
evaluation date.
MANAGEMENT'S ANNUAL REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING
Our management is responsible for establishing and maintaining adequate internal
control over financial reporting, as such term is defined in Rules 13a-15(f) and
15d-15(f) under the Exchange Act, for the Company.
Internal control over financial reporting includes those policies and procedures
that: (1) pertain to the maintenance of records that, in reasonable detail,
accurately and fairly reflect the transactions and dispositions of our assets;
(2) provide reasonable assurance that transactions are recorded as necessary to
permit preparation of financial statements in accordance with generally accepted
accounting principles, and that our receipts and expenditures are being made
only in accordance with authorizations of its management and directors; and (3)
25
provide reasonable assurance regarding prevention or timely detection of
unauthorized acquisition, use or disposition of our assets that could have a
material effect on the financial statements.
Management recognizes that there are inherent limitations in the effectiveness
of any system of internal control, and accordingly, even effective internal
control can provide only reasonable assurance with respect to financial
statement preparation and may not prevent or detect material misstatements. In
addition, effective internal control at a point in time may become ineffective
in future periods because of changes in conditions or due to deterioration in
the degree of compliance with our established policies and procedures.
A material weakness is a significant deficiency, or combination of significant
deficiencies, that results in there being a more than remote likelihood that a
material misstatement of the annual or interim financial statements will not be
prevented or detected.
Under the supervision and with the participation of our Chief Executive Officer
and Chief Financial Officer, management conducted an evaluation of the
effectiveness of our internal control over financial reporting, as of the
Evaluation Date, based on the framework set forth in Internal Control-Integrated
Framework issued by the Committee of Sponsoring Organizations of the Treadway
Commission (COSO). Based on its evaluation under this framework, management
concluded that our internal control over financial reporting was not effective
as of the Evaluation Date.
Management assessed the effectiveness of the Company's internal control over
financial reporting as of Evaluation Date and identified the following material
weaknesses:
INSUFFICIENT RESOURCES: We have an inadequate number of personnel with requisite
expertise in the key functional areas of finance and accounting.
INADEQUATE SEGREGATION OF DUTIES: We have an inadequate number of personnel to
properly implement control procedures.
LACK OF AUDIT COMMITTEE & OUTSIDE DIRECTORS: We do not have a functioning audit
committee and we have no outside directors serving on the Company's Board of
Directors, resulting in ineffective oversight in the establishment and
monitoring of required internal controls and procedures.
Management is committed to improving its internal controls and will (1) continue
to use third party specialists to address shortfalls in staffing and to assist
the Company with accounting and finance responsibilities, (2) increase the
frequency of independent reconciliations of significant accounts which will
mitigate the lack of segregation of duties until there are sufficient personnel
and (3) may consider appointing outside directors and audit committee members in
the future.
Management, including our Chief Executive Officer and Chief Financial Officer,
has discussed the material weakness noted above with our independent registered
public accounting firm. Due to the nature of this material weakness, there is a
more than remote likelihood that misstatements which could be material to the
annual or interim financial statements could occur that would not be prevented
or detected.
This Annual Report does not include an attestation report of our registered
public accounting firm regarding internal control over financial reporting.
Management's report was not subject to attestation by the our registered public
accounting firm pursuant to temporary rules of the SEC that permit us to provide
only management's report in this annual report.
26
PART 2 - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Corey Finnie and Virginia Finnie are disputing the acquisition of Finnie Water
Hauling Ltd. by Budget and are requesting damages of $Cdn 1,000,000 ($US
867,000) and 1,000,000 (after adjusting for stock splits) shares of the Company.
Approximately $948,000 of the $Cdn 1,000,000 was purportedly related to the
assumption of liabilities related to capital leases. The plaintiff is claiming
that these obligations were not assumed by the company. The company has assumed
these obligations. The outcome of this lawsuit is indeterminable at this time.
ITEM 2. UNREGISTERED SALES OF EQUITY AND USE OF PROCEEDS
On October 1, 2008, certain shareholders of the company entered into an
agreement to sell 100% of the outstanding stock of the company to certain
purchasers for a cash price of $275,000. On November 10, 2008, the company
acquired 100% of the outstanding shares of Budget Waste Inc., an Alberta, Canada
corporation from Budget Waste, Inc. a Nevada corporation. The purchase price for
the stock of Budget waste Inc. was 5,496,054 newly issued and restricted shares
of the company's stock, representing approximately 52% of the outstanding shares
of the company post-acquisition
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
See ITEM 2
ITEM 5. OTHER INFORMATION
None
ITEM 6. EXHIBITS
(a) Exhibits
Exhibits Description
- -------- -----------
31.1 Certification pursuant to Rule 13a-14(a) under the Securities
Exchange Act of 1934
31.2 Certification pursuant to Rule 13a-14(a) under the Securities
Exchange Act of 1934
32.1 Certification pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2 Certification pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
27
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant, BWI
Holdings, Inc., caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
Date: December 15, 2008 /s/ Jim Can
-----------------------------------
Jim Can, CEO
28